Northstar, ALTO Splurge on a Diversified Portfolio

The Denver-based privately held investment company and the New York-based equity funds specializing in the acquisition of income-producing assets have made history with a new purchase across 12 states.

Northstar Commercial Partners and ALTO Real Estate Funds have purchased a 5.9-million-square-foot, 24-property portfolio for $224 million, the two companies announced late last week. What the buyers describe as a “diversified, value-add portfolio” includes properties in 12 states and consists of 13 industrial facilities, eight office buildings and three retail assets.

The seller is Moshe Silagi of Silagi Development and Management, of Thousand Oaks, Calif., a Northstar spokesperson told Commercial Property Executive. Closings have been held on all but two properties, office buildings in California and Georgia.

“This deal is the most significant acquisition in Northstar’s company history, bringing along with it our largest opportunity to date to create a positive impact for businesses and local communities nationwide,” Brian Watson, Northstar’s founder & CEO, said in a prepared statement. “It is very rare in this economic environment to acquire an off-market deal of this magnitude, diversity, and low occupancy rate, in order to drive very attractive opportunistic level returns.”

Watson reportedly invested nearly two years into the transaction.

Twenty-one of the properties are in towns or areas with high unemployment, often well above national and state averages.

“We don’t just focus on depressed economies,” Watson told CPE. “Our focus is to acquire vacant or highly distressed commercial real estate at 50 percent or less of its replacement cost value. By buying buildings with ‘good bones,’ in good markets, we are able to reposition the assets to create strong value. Some of the assets in the SDM portfolio are in challenging markets, and we will look forward to creating value for those and the others as well. Some of the assets have strong tenants, and we look forward to securing more.”

Those strong tenants include Time Warner Cable; Bechtel Corp.; ATSG, one of the world’s largest distribution holding companies; Dollar Tree; and Progressive Corp., the car insurer.

“We received a great discount on this portfolio, as we acquired 24 assets in one transaction as opposed to acquiring each asset individually. Therefore, the profit potential of this deal is extremely high,” Mody Kidon, chairman & co-founder of ALTO, said in the statement.

The portfolio “benefits from a good mix of geographic and sector diversification,” added Yaniv Melamud, CEO & co-founder of ALTO. “We anticipate that we will be able to sell 40 percent of the portfolio within a short period of time and with a significant profit. The remaining assets can be sold after we increase the occupancy rate,” which currently averages about 70 percent.